This podcast meets Jack Chen - mortgage broker at Banker’s Finance - as he explains how he built his investment in property portfolio so that both he and his wife could leave their full-time careers, and how he turned down early retirement to start his own mortgage broking business.
Escaping the restraints of the nine-to-five in IT to become his own boss, follow Chen’s journey and discover the strategies he uses helping his own clients to visualise your own success.
Jack Chen is a mortgage broker at Bankers Finance, and following his departure from the IT industry after ten years, Chen runs his own mortgage broking company to share his successful strategies with fellow investors.
I think most property investors have some element of doubts or some element of self-limiting beliefs. But if you can actually take them through the journey, if you actually take the time to paint the picture as to their possibilities they can actually visualize it for themselves. That you know like I say if they thought they could only have one or two properties but in the end, they could actually service for eight or nine properties. That's really empowering. And if they can see that they'll be actually motivated to take action.
So what is it like on a day-to-day basis running a mortgage broking business?
Because I’ve just started out my mortgage broking business, I spend you know part of my day on the marketing side on trying to build referral networks just so I have a steady source of leads and a steady source of product prospects coming through the door. The other part of my day I spend actually meeting clients, talking to clients.
But the bulk of the day I actually spend at my desk looking at the client's circumstances and then modelling out like what could be achieved given their financial circumstances. So as I was mentioning earlier it's like if you can paint a picture as to what the possibilities are, it's really mind-blowing stuff, it's really empowering. I actually spend a lot of time modelling. So if you talk to other mortgage brokers, if there are any mortgage brokers listening to this they'll probably be rolling their eyes because just of the time commitment required to do this. Most mortgage brokers will just model out your next purchase. But I'll actually take the time model out next four, five, six purchases just so I can have that conversation with my clients and paint that picture as to the possibilities.
Although Chen’s interest in property developed later in his life, the inspiration from the hard work by his parents’ in developing their own business led him to apply their ethics to his own property investment career.
To be honest I only developed an interest for property around the time that I started my IT career. So growing up I didn't have any role models. I didn't have any interest in the property. Probably the next closest thing would be watching my parents. They didn't own properties but they did have their own small business. And I saw it grow. It started out just being out of the shed. We used to import stuff. My dad would keep it in the backyard shed. And that was how it started. And then I just saw it grow and grow and grow and eventually he sold out of that business.
He retired in his 50s and now he spends you know half the year travelling the world. So he's living the life now so that really inspired me like because I knew how obsessed he was with the building that business and that's kind of the attitude that I started to take on my property investing.
Mainly it was Chen’s early interest in computers and the intensive start of his career in the IT industry that led to his later movement into property investing.
I grew up in the hills district of Sydney for high school I went to Cherrybrook Tech and then for Uni I went to UTS.
I've always been passionate about computers. So it’s only natural that I did a degree in IT and then my first grad job was at an IT consultancy. So I think I'm like when I first started out I was only making like 45 K or something like that in my first grad job. And I was doing ridiculous hours I was doing any 60 70 80 hour weeks at that time. And I just thought to myself I can't sustain this. There must be a better way. And that's kind of what led me to property.
Before his move into the property, Chen gained industry experience and developed the analytical and problem-solving skills that would help his future investing career.
I started my first job in 2006.
I've been in the IT industry for the last 10, 11 years. So I first joined that IT consultancy. I was there for about four and a half years. I was doing ridiculous hours. I needed a way out. So eventually I left that and I joined the industry. So with that, I got a bit of a pay bump and a bit more regular hours. I was doing 40, 50 hour weeks instead of you know 70, 80 hour weeks. That was a good transition and I don't regret it for a second. But like I was still stuck in the rat race and I knew that I wanted something more for myself.
For the most part of my career, I was doing business analysis so that was really the intersection of business and technology. So I'm talking to the techies talking to the business figuring out solutions and then actually implementing solutions. So actually, for the most part, I actually enjoyed my work. I was you know reasonably fulfilled. What I didn't like was really the idea of work and being forced to you know sit behind a desk in the office nine to five and been told what to do. No, I didn't really mind work. It was really just the idea and the restraints around having to work for someone else.
While the change of pace allowed Chen more creative freedom, the restrictions and lack of control in his career became the catalyst for his exit from the corporate world.
More recently I started to get into software product management. So actually creating software products and again like that was another avenue where I could you know let my creativity run a little bit wild. So yeah again I quite enjoyed that. But then coming back to the idea of work and working for a paycheck. So the company that I worked for got bought out by an international firm. And during the whole buy-out process my hands were stuck I couldn't make any decisions, all my authority and my decision making power were just stripped. So like I was just going to work and spinning my wheels I couldn't do anything. And there was a real possibility that I might get retrenched or whatever else. So I really really disliked that. And the fact that that was thrust upon me and I had no control over that. That was the trigger point really me to leave my corporate career and start my own mortgage broker business.
Well, that was very recent so I started that job about a year and a half ago. And then that whole buy up process that was about six months ago.
When Chen left the corporate world, he decided to educate himself before taking the plunge into his property investing journey.
So as I mentioned earlier when I first started out in my career I was doing crazy hours and I just needed a way out. So I was trying everything. You know I had a couple of e-commerce businesses going, I went to see a financial planner, I got some advice around shares and then I started educating myself on property. So I picked up a few different books on property and then educated myself. And then after reading those books I was convinced I was like wow this is really powerful. I can actually see how property might create wealth for me in the future. So I decided there and then I would start saving for a deposit. I mean I was a natural saver anyway so it wasn't too crazy. But I finally decided what I was going to direct my savings activities towards. Because I was still living at home I was saving pretty much my whole paycheque. So then I decided I would keep accumulating and then use that for a deposit for an investment property.
Despite the doubts of his friends and family and its initial condition, Chen’s first property would be the first of his extensive portfolio.
The first property I purchased in 2007. So my second year of full-time work. I bought a two-bedroom walk-up flat in Marrickville in Sydney and I bought that for 307 I remember, three hundred and seven thousand dollars. And at that time like friends and family that I told about this they just started laughing at me they were like why would you spend that much on a dump like that because it was literally a dump like it was pretty bad. It needed a lot of work. They were like why would you spend 307000 dollars on something like that. You’re out of your mind. So from the get-go, I had a lot of discouragement. But I knew from reading those books that if I applied those principles that eventually time in the market and as a property cycle goes through eventually I'll make my money.
After expanding his portfolio to five properties, Chen’s personal fears of debt and climbing interest rates would, in hindsight, lead to his biggest investing regret.
I think this mistake is shared with a lot of property investors actually. And that mistake is actually selling a property. So that Marrickville property that I bought back in 2007 I actually sold that in 2012. You know I made about 150k on that which is nothing to sneeze at. But 2012 that's really just before the Sydney boom got going. So that's my biggest regret selling that property. When if I had held it you know that 307K property that I bought back in 2007 if I had held it would probably be close to 800 Know if I had held it if I held on to it. But you know I was a little bit fearful at that time because interest rates were starting to get back up. So I think interest rates were about seven points something may be close to 8 per cent. And I was trying to pay down as much of my PPOR debt as I could. So that's what led me to sell it. But really I could have afforded to hold it. So that's my biggest regret.
Because it was my first property and because I was a little bit scared of debt at that time.
I think it was mostly driven by fear. The fear of you knows if rates keep climbing up and I can't afford to hold it. And I also kind of wanted the certainty of taking the cash and then paying down my PPOR non-deductible debt.
Fortunately for Chen, he quickly recovered and continued his investing journey.
Luckily in 2007, there was the seven thousand dollar first home owners grant. So I purchased that property put in the 20 per cent deposit moved in and renovated it and then moved out back home with my parents and then just continued to save like crazy for my next deposit.
One of Chen’s ultimate successes, through his project management skills and natural saving habits, allowed him and his wife to leave full-time work and let his property portfolio to grow.
So the aha moment for me as I was around 2013 2014. And then I plugged all the numbers in a spreadsheet. Started to project it out. So at that point in time, I had I think about three-point something close to four mils in property. And the aha moment for me was when I projected out like the capital growth year on year of say 5 per cent 6 per cent 7 per cent, just model out different scenarios. Even the most conservative figure of 5 per cent year on year growth, like my property portfolio was generating more equity for me than what I was earning in my day job. So I had reached the tipping point where I didn't have to do anything like I didn't even have to show up to work and my property portfolio would be generating more money for me than what I was doing for myself in my day job that was the aha moment. And then at that point in time around that time was when I actually decided to quit my job. So me and my Mrs we've both cut our jobs. And we went travelling for about seven-eight months.
So I mean I guess we're both very natural savers. So at that point in time, we had pretty much paid off our PPOR. Pretty much we had been very close to paying off our PPRO. So we had a lot of money in offsets. And just the fact that our property portfolio would generate wealth for us in the background that gave us enough confidence to go see you later we're no longer tied to our day jobs.
The opportunity for early retirement led Chen to seek out new experiences.
And that was also around the time where you know I was absolutely confident that I'd be in a position where I could retire before the age of 40. So I was kind of curious. I was asked myself questions around. OK, You've got enough money now. What are you actually going to do with yourself like how are you going to find fulfilment and what are you going to fill your days with? And it was kind of why we decided to quit and go travelling so that we could you know explore different hobbies, meet new people. We did a language course. Just so we could have new experiences.
But Chen’s desire for fulfilment and personal growth resulted in his movement away from early retirement.
But the funny thing is like about six months into our trip you know I started to question myself or is that all there is. I kind of feel like I'm missing something. And it's only more recently I've started to realize what was missing. And it's really a sense of contribution, a sense of growth and a sense of, you know, giving something back, personal growth that's truly fulfilling. So that's what I've come to realize. And now the idea of retirement so foreign to me now I don't even aspire to be retired anymore.
So I've done a complete 360.
Chen’s desire to help fellow investors and the significant role of mortgage broking for property investments led to him running his own business.
So I'm 32 at the moment and now the reason why I wanted to get into mortgage broking is so that I can create something from scratch for myself and then be able to have that meaningful impact on others.
I think mortgage broking amongst all the other property related professionals, I think mortgage brokers have the biggest ability to have an impact on a property investors property journey because for me I think property really is a game of finance.
If you can't get your finance structures right you're toast. I think the whole game of property is underpinned by finance and then just reflecting on my own journey, the mortgage brokers that I've worked with you know they've educated me they've expanded my mindset and then they've painted possibilities as to what could be achieved. I think I want to do something similar.
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Chen’s goals of financial security, having the flexibility and time for his family, and his experiences in the IT industry led him to dive into property investing.
So my why is to create financial certainty, create financial security and basically free myself from a day job. So as I was mentioning earlier that I had a really negative experience when I first entered the workforce doing those ridiculous hours. And more recently with the whole corporate takeover, you realize you're really just a cog in the wheel. I wanted more certainty for myself. That's why from you know the second year of full-time work I started on the property investing journey. And then since then basically on average every year as soon as I had saved enough of a deposit I would buy my next investment property and then I just kept replicating that, just kept doing it, doing it, doing it, doing it and then eventually had reached a tipping point where there was a sufficient asset base where you know just time in the market and compounding would start to work in my favour. So now that's created options for me. For me and my missus, when we do start a family I want to be around them. I want to see my kids grow up. I want to be able to take them to school pick them up if they're sick. I want to be able to take care of them. So it's really just having flexibility and more freedom. And I also see myself spending more time abroad. So I do want to live part of the year abroad and experience different cultures. Yeah. It's basically all comes down to flexibility. And that's why you know I put in the hard yards.
And it's only recently that I'm starting to reap some of those benefits.
In hindsight, Chen reflects on how his fear of debt affected the success of his investing strategy.
if I’d known what I know now I could have pushed it so much harder. Throughout most of my journey, I was putting 20 per cent deposits so I was literally waiting, waiting until I had saved enough of a deposit to use for the next purchase. You know if I had gone with higher LDRs, if I had pulled equity out sooner and used that to fund part of the deposit I could have grown my Sydney portfolio a lot quicker. As you know the Sydney market has gone absolutely gangbusters. So if I had pushed myself harder back when I first started in 2007 and had the doubling effect on a much larger Sydney asset base I'd be laughing right now.
If I had learned to overcome some of my fears around taking on debt. Then you know I wouldn't be so fixated on saving that twenty per cent deposit out of my salary income for instance.
Chen’s passion for property and research led him to reap success from his portfolio despite his fears.
I think I would have got to where I am in half the time and
you know I would have a much stronger equity position and create even more opportunities for myself if I had pushed myself harder. But you know hindsight is 2020. I'm still grateful and I'm still proud of what I did because I did take like very consistent action. So like if you look back at my timeline it was literally like every year I'd be buying property. So like just that consistency and that obsession really, it was kind of an obsession for me. Every weekend I'll be driving out to open homes checking out different properties. I would be you know researching different markets, I'd be looking at demographic data, be looking at where infrastructure was going in. Like I just made it a real obsession of mine.
With the help of his mortgage broker, Chen was able to overcome his fears and alter his investing strategy.
So part of how I overcame that fear was working with a really good mortgage broker. So I had this preconception around my PPOR.
I wanted to pay it down as fast as I could and I didn't want any debt against my PPOR. But you know I sat down with a mortgage broker. He started to sort of explain
the fact that you know if you do pull out equity from your PPOR and use it for investment purposes it's tax-deductible blah blah blah. I kind of already instinctively knew all this but there was just this mental barrier that said OK my PPOR has to be debt-free. And I think that's part of my cultural upbringing. I don't know what it was. So eventually it was just letting go of that fear. So eventually I started pulling out equity left right and centre so each time I had spare equity whether it was my PPOR or properties I had purchased you know a few years ago I would just pull out equity even if I didn't know what I wanted to do with it, even if I didn't have a purchase lined up, as soon as there was equity just pull it out and just have it sitting there you’re not incurring interest anyway. You might as well. So like I mean that was a gradual process. But yeah it was really working through with a mortgage broker that helped me overcome some of my fears.
Research and education were key parts of Chen’s path to success, and have been a major influence on how he developed his strategy.
So the first like the very first book that I picked up had a bit of a corny but catchy title. It's called How to Grow a Multi-Million Dollar Property Portfolio in Your Spare Time. That book was written by Michael Yardney. And you know it's a bit corny but actually, when you read it it's actually got a lot of good principles in there and really all the fundamentals around property investing are very you know very well written in that book. So if there's anyone that's just starting out I would highly recommend that book. I read other books that are you know more around cash flow property. So I got different ideas, different opinions then just basically I pulled in whatever I thought was you would apply for my circumstances and then just came up with my own strategy. So that's how I first started out. One of my lessons learned was not seeking out mentors and not connecting with other property investors. So throughout pretty much 90 per cent of my property investing journey, it was really just me, like just the books and me, that was it.
After being so successful on his own, Chen’s exploration of the online investing community led him to extend himself and his goals.
It was only about a year ago that I started going to property chat meet up. So there's this forum called Property Chat used to be called Summer soft. I wasn't very active previously but it's only in the last you know 12, 18 months that I started to be a bit more active on those forums, started to go to the meetups that they hold. Generally every four to six weeks there will be a meetup and after starting to go to those I actually realized I set my goals way too low.
So when you go to these meetups you realize there are people that have been investing 20 years 30 years and you know they've got massive, massive property portfolios. Like and I went in thinking I'm all that, I went in thinking I was done with property like done with my accumulation phase. But then I realize I had actually set my goals way too low. So then I started to connect with these people, started to learn about their strategies. And it was more about mindset really it's more the fact that they kept setting themselves new and higher goals. And that started the rub off on me. So when I first went in I thought I was done with the accumulation. Then I realized why to sell yourself short.
The inspiration Chen received from getting involved with other investors also resulted in him finding his own mentor.
So shortly after I bought two more properties. This is the power of association. Once you're in that kind of environment like it starts to feed your brain juice, like you start to get inspired. So yeah I bought two more properties and then I sought out a mentor as well who is my mortgage broker.
And so it's a combination of having a mentor and connecting with like-minded individuals that I’ve taken my property investing to a whole new level. Whereas 90 per cent of my journey I've been doing it alone and like it pains me to think if I had connected with these people if I had sought out mentors right from the get-go how far I could have gotten it.
It's kind of painful to think of it.
After being surrounded by like-minded investors and mentors, what is the best advice Chen has received?
I think the best advice,
It's not the specific piece of advice it's more it's coming back to the whole mindset thing. It's just around understanding what your self-limiting beliefs are. So for me, it was fear of debt. So luckily I had a really good mortgage broker at the time that had coached me around overcoming some of these fears. Yeah, I think it's really just the ongoing coaching and mentoring that you get.
Chen’s priorities of budget and location allowed him to establish his portfolio and financial security.
So when I was buying in Sydney I had a budget of you know between 200 K and 400K. And I wanted to be you know within a reasonable commute of Sydney CBD. I wanted to be within a 20-minute commute to the city because the city is where all the creative and high paying professional jobs are being created. So for me, proximity was number one. Obviously, with that kind of budget, I couldn't buy houses. So I was happy to settle for units particularly walk-up flats. So these are like the red brick apartment buildings like two, three stories tall. They have you know a pretty decent land component. It's not like those high rise apartment where you're like one unit of 200. These are like boutique-style apartments.
There are maybe only 10 other units in the building, 12 units. So I was targeting walk-up flats walking distance to a train station and then with a 20 minute or less commute to Sydney's CBD. So that was my general strategy and I just kept buying them like I was just collecting them like postage stamps. Like that's just how I view it. The more units that I could accumulate the better I'd be set up for my future.
Settling for smaller units resulted in Chen adding properties of higher quality to his portfolio as well as better value.
My Marrickville one, for instance, was a double brick and all the walls were concrete walls so it's not like apartments that they build these days where the walls are like paper-thin. I could never when I was living there I couldn't hear my neighbours at all it was great. So they don't build them like they used to, had a like a garage, you had like a storage area, these are all the kind of facilities that people look for. And then the other benefit is that the ongoing strata costs are pretty low as well.
So like I'm starting to hear stories of investors of walk-up flats. So they're getting approached by developers to knock down the apartment complex to build a high rise. So that's how valuable land is. So as you know buildings depreciate, land appreciates. So if you're like one of 12 and a developer knocks on your door and wants to redevelop that plot of land you've got a lot of bargaining power if you're one of 10 as opposed to one of 200.
By sticking to his budget, Chen’s portfolio across Sydney and Brisbane is reflective of the significant market differences.
So all my Sydney units all two-bedroom walk-up flats with a covered car space or garage, walking distance to a train station. And then for my Brisbane properties, they are all houses because like my sweet spot in terms of investment properties is around that 300 to 400 maybe 450 K mark. And in Brisbane, you can buy houses for that. So as you know like with the Sydney boom houses did a little bit better than units so that's why if I could afford to buy houses I would definitely choose houses over units any day of the week. So for Brisbane, all of my investment properties in Brisbane are all houses.
By forming his strategy from a combination of grants and rentvesting, Chen was able to expand his portfolio across Sydney.
It's all spread out so first one’s in Marrickville. Basically I was just looking to see where there was value. So I wanted you to know a low entry price and strong yields but still tick all those other boxes you know the walking distance to a train station blah blah blah. So the first one was in Marrickville. My fiance at the time bought her first property in Eastwood. This was back in 2009 so she was able to get the 14 k, first homeowners, grant. You know we got married, we moved in, renovated the place, we moved out and they were renting for a period of time. So we were renting back before the whole term rentvesting was even invented. I've made it an obsession, so any strategy that I could employ to further my goals I would use. So one of them obviously took advantage of the grants, satisfy all the criteria and then move out again. My other properties are in Belmore, Homebush West, and Guildford which is near Parramatta.
Although Chen had already established his portfolio, he still takes the time to focus on his own mindset.
So personal habit of mine is carving out you know maybe 30 minutes of my day to spend listening to or reading personal development books. I find mindset is everything. Like once you can understand who you are, the more you can achieve. So that's one of my habits so either an audiobook or I just sit down and read for at least 30 minutes a day.
So if he were to meet his past self from 10 years ago, what would he tell him?
So I would say to him. You've done well. You should be proud of your achievements. You're on the right track but don't ever sell yourself short. Keep pushing yourself keep setting big goals.
Moving away from the past and looking to the future, what is Chen most excited about?
I'm excited about growing my portfolio even further. So I think I can visualize my portfolio being double what it is today. And what excites me is learning more about the property. So for me traditionally my investing strategy has been pretty passive, buy and hold. But I think to reach the next level I'm going to have to try something a little bit different. I might get into you know small scale developments. I might get into more subdivisions, sort of manufacturing equity style investments. Whereas previously it's been pretty much passive buy and holds and wait for the market to do its thing.
So how does he stand out from other brokers?
So I think the point of differentiation for my business is I actually take the time to identify and uncover what your financial goals are. And then I'll go away and actually model it out to see how far you can take it and then I'll be with you every step of the journey. That's my value add, and that's my point of differentiation.
If you wish to connect with Chen you can find him via.